Business News

Meredith Delivers Strong Fiscal 2013 Third Quarter And Nine Month Results

Thursday 25. April 2013 - Meredith Corporation (NYSE:MDP; www.meredith.com), the leading media and marketing company serving American women, today reported fiscal 2013 third quarter earnings per share of $0.65, compared to $0.47 in the prior-year period.

Excluding special items in both periods, fiscal 2013 third quarter earnings per share grew 9 percent to $0.72, compared to $0.66 in the prior-year period. Total Company revenues rose 7 percent to $370 million.
For the first nine months of fiscal 2013, Meredith’s earnings per share were $2.00, compared to $1.65 in the prior-year period. Excluding special items in both periods, earnings per share rose 18 percent to $2.17, compared to $1.84 in the prior-year period. Total Company revenues increased 8 percent to $1.1 billion, including an 11 percent increase in advertising revenues. Cash flow from operations increased 7 percent to $113 million.
“Our diversified business model delivered solid growth in revenues, operating profit and cash flow for the third quarter and first nine months of fiscal 2013,” said Meredith Chairman and CEO Stephen M. Lacy. “And we continued to demonstrate our ongoing commitment to Total Shareholder Return by raising our dividend 7 percent, our 20(th) straight annual dividend increase.”
Lacy noted the following fiscal 2013 third quarter business highlights:
— National Media Group advertising revenues increased 5 percent, driven by
the recent acquisitions of the Allrecipes, EveryDay with Rachael Ray and
FamilyFun brands. Circulation revenues also increased, benefitting from
growth at comparable titles; contributions from EveryDay with Rachael
Ray and FamilyFun magazines; and a test issue of a magazine based on the
Allrecipes brand.
— Local Media Group non-political advertising revenues were slightly lower
than the prior year. However, automotive advertising, the largest
category, increased 6 percent. Total revenues also benefitted from an
increase in retransmission fees.
— Total Company digital advertising revenues grew 45 percent and reached a
record high for a fiscal third quarter, driven by strong performance in
the National Media Group.
— Consumer engagement strengthened across all of Meredith’s media
platforms. Meredith magazine readership is at an all-time high of 116
million, while Meredith’s local television station group delivered
strong performance during the February ratings period. Traffic to
Meredith’s websites rose approximately 40 percent to 40 million average
monthly unique visitors.
— Meredith raised its annual dividend to $1.63 per share. Over the last
decade, Meredith has grown its dividend at an average annual rate of
approximately 15 percent. Meredith also repurchased approximately
380,000 shares of its stock during the third quarter of fiscal 2013, and
has repurchased 1.1 million shares in the first nine months of fiscal
2013.
Fiscal 2013 third quarter results included a special item of $5 million ($3 million after tax, or $0.07 per share) for professional fees and expenses related to a previously disclosed transaction that did not materialize. Information on the special items in fiscal 2013 and fiscal 2012 is available in Tables 1-4 of this press release.
OPERATING GROUP DETAIL
NATIONAL MEDIA GROUP
Meredith’s National Media Group includes leading national consumer media brands delivered over multiple platforms that offer clients access to 100 million unduplicated American women every month – a reach unmatched in the industry. It also features robust brand licensing activities and innovative business-to-business marketing products and services.
Fiscal 2013 third quarter National Media Group revenues grew 6 percent from the prior-year period to $284 million. Operating profit was $43 million, compared to $23 million in the prior-year period, which included a net special charge of $13 million.
Fiscal 2013 third quarter operating profit growth was driven by higher advertising and circulation revenues, as well as stronger performance from brand licensing activities and Meredith Xcelerated Marketing.
Looking more closely at advertising performance for the third quarter of fiscal 2013 compared to the prior-year period:
— Total advertising revenues grew 5 percent, driven by the recent
acquisitions and Meredith’s digital properties. On a comparable basis,
advertising revenues declined 3 percent, an improvement over the first
half of fiscal 2013’s advertising performance.
— Digital advertising revenues grew more than 55 percent, boosted by the
addition of Allrecipes.com. On a comparable basis, digital advertising
revenues grew 16 percent.
— The food and beverage (+13%), financial services (+56%), apparel (+45%)
and home (+13%) categories were stronger, and the weighted average net
revenue per magazine page increased approximately 5 percent.
Circulation revenues were higher in the third quarter of fiscal 2013 due to growth from existing, or comparable, titles; and the addition of EveryDay with Rachael Ray, FamilyFun, and the Allrecipes test magazine.
Digital traffic rose by more than 45 percent in the third quarter of fiscal 2013, driven by the acquisition of Allrecipes and aggressive digital marketing initiatives. In addition, Meredith generated 3.8 million digital orders for print magazine subscriptions during the first nine months of fiscal 2013, an increase of 75 percent over what was generated in the prior-year period, and is on pace to acquire more online subscriptions in fiscal 2013 than in the last two fiscal years combined.
“We are realizing the benefit of our recent acquisitions, which we’ve now fully integrated into our creative and sales structures,” said National Media Group President Tom Harty. “We also continue to leverage our expertise across media platforms – as demonstrated by our very successful test issue of a print magazine for the Allrecipes brand, the introduction of new mobile apps, and a significant increase in video content creation.”
Other revenues were $64 million in the third quarter of fiscal 2013, compared to $68 million in the prior-year period. This was due primarily to lower sales of books and timing of revenues from Meredith’s consumer events activities, partially offset by revenue gains from Meredith’s brand licensing activities.
Meredith Xcelerated Marketing operating profit grew in the third quarter of fiscal 2013 from the prior-year period, representing an improvement over fiscal 2013 first half results. MXM has renewed all its major clients for calendar 2013, and its new business pipeline continues to be strong. MXM landed several new accounts – including AT&T and Samsung – along with business expansions with existing clients such as Church & Dwight and Allergan. Meredith expects these new and expanded programs will translate into growth for MXM in calendar 2013 compared to the prior year.
For the first nine months of fiscal 2013, National Media Group revenues grew 4 percent from the prior-year period to $801 million. Operating profit was $95 million in both periods. Excluding special items in both periods, operating profit for the first nine months of fiscal 2013 was $100 million, compared to $109 million in the prior-year period, due primarily to lower advertising revenues at comparable magazine titles.
LOCAL MEDIA GROUP
Meredith’s Local Media Group consists of leading local television stations, many in fast-growing markets, and a video content creation unit that produces national broadcast and custom programming.
Fiscal 2013 third quarter Local Media Group revenues rose 10 percent to $85 million. Operating profit was $24 million, compared to $23 million in the prior-year period which included a special item of $1 million.
Looking more closely at performance for the third quarter of fiscal 2013 compared to the prior-year period:
— Non-political advertising revenues were $66 million, slightly lower than
the prior-year period. The automotive (+6 percent), retail (+20
percent) and furnishings (+9 percent) categories were stronger.
— Political revenues were $1.5 million less, as expected in a
non-political period.
— Other revenues and operating expenses both increased, due primarily to
growth in retransmission revenues from cable and satellite television
operators, and programming fees paid to affiliated networks.
Meredith’s connection with viewers also strengthened in the important February ratings period, and its stations in Phoenix, Hartford, Kansas City and Saginaw were No. 1 in their markets from sign-on to sign-off.
Digital traffic rose 8 percent, driven by initiatives to improve content and search engine optimization, as well as continued focus on mobile apps aimed at news, sports and weather-related information.
Meredith Video Studios significantly expanded the reach of its daily syndicated The Better Show through an agreement with Crown Media Family Networks to distribute the program on the Hallmark Channel beginning in September 2013. The agreement gives the program its first national cable distribution platform as the Hallmark Channel is available in nearly 90 million homes. In addition, The Better Show was renewed for a seventh season in syndication.
“We’re pleased to have delivered another quarter of revenue and operating profit growth,” said Local Media Group President Paul Karpowicz. “Additionally, we set the stage for additional growth in revenues from The Better Show by securing national distribution via the Hallmark Channel.”
For the first nine months of fiscal 2013, Local Media Group operating profit was $96 million, compared to $61 million in the prior-year period. Excluding special items in both periods, operating profit grew 58 percent to a record $98 million. EBITDA margin for the first nine months of fiscal 2013 was a record 40 percent. Revenues rose 23 percent to $284 million, including $38 million of net political advertising revenues.
OTHER FINANCIAL INFORMATION
Consistent with its Total Shareholder Return strategy, Meredith repurchased 1.1 million shares of its stock in the first nine months of fiscal 2013. At March 31, 2013, $47 million remained under the current repurchase authorization.
Total debt was $355 million at March 31, 2013, and the weighted average interest rate was 3.6 percent. Meredith’s debt-to-EBITDA ratio for the 12 months ended March 31, 2013, was 1.4 to 1.
Cash flow from operations increased 7 percent in the first nine months of fiscal 2013 compared to the prior-year period, and totaled approximately $190 million for the 12 months ended March 31, 2013.
Corporate expenses increased $9 million in the third quarter of fiscal 2013 compared to the prior-year period due primarily to the special item related to professional fees and expenses from the previously disclosed strategic transaction that did not materialize; contributions to the Meredith Foundation; and higher health care expenses and incentive compensation accruals.
All earnings per share figures in the text of this release are diluted. Both basic and diluted earnings per share can be found in the attached Condensed Consolidated Statements of Earnings.
OUTLOOK
Looking more closely at the fourth quarter of fiscal 2013 compared to the prior-year period:
— National Media Group advertising revenues are expected to be flat to
down slightly.
— Total Local Media Group revenues are expected to increase in the
mid-single digits. Non-political advertising revenues are expected to
be flat to up slightly. Additionally, the Local Media Group will be
cycling against $3 million in net political advertising revenues
recorded in the fourth quarter of fiscal 2012.
Meredith expects fiscal 2013 fourth quarter earnings per share to range from $0.68 to $0.73. When added to the $2.17 generated in the first nine months, Meredith expects fiscal 2013 full year earnings per share to be toward the upper end of the original $2.60 to $2.95 range established at the beginning of fiscal 2013. All amounts are before special items.
A number of uncertainties remain that may affect Meredith’s outlook as stated in this press release for the fourth quarter and full year fiscal 2013. These and other uncertainties are referenced below under “Safe Harbor” and in certain filings with the U.S. Securities and Exchange Commission.